Posted by: clholoman | July 19, 2010

A note prompted by vacation

We were on vacation last week at Caswell Beach, NC, where we’ve gone with my family for many, many years. Here’s a view from one of the cottages we rented:

That’s the Oak Island lighthouse, the brightest lighthouse on the East Coast. Lighthouses are interesting. They are the textbook example of a public good. Public goods are things that exhibit 2 characteristics:

  • non-rivalness of consumption (also known as jointness of supply). This means that one person’s consumption of the good doesn’t leave any less for other people to consume.
  • impossibility of exclusion. This means that no one can be kept from consuming the good, even if they didn’t contribute to its provision.

Given these conditions, provision of a public good is a Prisoner’s Dilemma: even though everyone would prefer that the good be provided, no one has the individual incentive to contribute to its provision, so the good is undersupplied, or not supplied at all. (Demonstration of this is left as an exercise 🙂 )

Put another way, free markets will not adequately provide public goods and most of the time, that means that government must step in and provide them. This is something that even that champion of the invisible hand, Adam Smith, recognized.

The problem arises when you note that there are no pure public goods–it’s an ideal type.* So once you let that camel’s nose under the tent, we’re back at one of the seminal political debates–the appropriate role for government. I’m sure we’ll explore many facets of that over time.

It’s funny that when we were in NC, people were talking about the possibility that the new bypass around Raleigh might be a toll road. Roads are a great example of a quasi-public good; they sort of have non-rivalness of consumption, although they are subject to crowding, and they clearly are excludable–tolls keep out people who don’t pay (although in fact, it’s almost impossible to charge enough to  pay for both initial construction and upkeep.) There are lots of examples from history that prove that allowing the private market to provide roads leads to way too few. And government provision of roads has been used (by “Kingfish” Huey Long, for example**) as a symbol of the government’s committment to the common man (as they allow farmers better opportunities to get their goods to market.) North Carolina prided itself on being the “good road state” when I was young, due to a massive effort to upgrade the secondary road network in the ’50s and ’60s. Nowadays, tolls are used as much for controlling traffic as for revenue generation. Even small tolls will deter enough people to affect traffic flow, apparently.

There are several other interesting (to me, at least) topics to tease out here, but perhaps another day.

*Oddly, lighthouses seem to me to come pretty darn close to the ideal type. But lighthouses have been provided by non-governmental actors in the past (ship-owner associations, for example). But I suspect they are still way underprovided in that situation.

**Commerical: He’s the model for the fictional Willy Stark in All the King’s Men, one of the great political novels of all time, IMO. It’s been made into a movie twice and we’ll almost certainly watch one version or the other in my Politics and the Movies course at Hilbert this coming semester. Sign up now!

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Responses

  1. I have had a good time thinking about the concept of a public good concept since you brought it up. I agree that the lighthouse seems to be an ideal type, granted the two identifying properties. One fun thought was this: “It seems that the lighthouse and the pilot provide the same service to the same market. How did they come to use opposite funding models?” It isn’t a very hard question; I thought it might be a good discussion topic or test question in an intro course.

    A decade or so ago in Our Town we had a dust up about a publicly-funded structure, purportedly art, to be erected adjacent to a well-traveled boulevard. Now this must be an ideal type: a publicly accessible sculpture meets the criteria and is to be consumed by the general public rather than a user group (in the case of the lighthouse, mariners.)*

    For my Train of Thought, it was a short trip from the lighthouse and the sculpture to a situation that broke out in the Letters to the Editor page in the local rag. Marla and Nancy, both fixtures on the Democrat A-list hereabouts, wrote on almost sequential days, identifying the same mechanism of government, one concluding that it was a very good thing, the other concluding that it was bad.

    Nancy said public funds should be used to support the arts, because there is no doubt in her mind “that the arts offer a spiritual enrichment that contributes to a better and more wholesome and healthy life.” She spoke in praise of the recent performance of Carmina Burana.

    Marla took a school board member to task for support of the charter school program, which “tend to take money from all public schools to enhance education for a small percentage of students.”

    In both cases, the mechanism is to use public funds for the benefit of a undistressed sub-group.

    It seems to me that what’s wanted is a rule of thumb. Is there a field guide to determining when public funding for a non-distressed sub-group is a good idea, or is that a ‘What is the true role of government’ question? If it is the case that public funding is really not such a good idea for a non-distressed sub-group at any time, then don’t the rules for a public good have to be tweaked to say that most everyone should be a consumer of the public good (like clean air)?

    _____
    * I acknowledge that there are footholds for other arguments here, including a)art consumers are a separate user group, and b) the lighthouse can be considered to occupy the same role as the sculpture for non-mariners. But I press on.

  2. The lighthouse is no longer operational as a navigational tool. The light has been replaced several years ago when the light was donated to Friends of the Oak Island Light (FOIL) so I doubt it is still the brightest light on the east coast. The light now is just a decorative tool.

    I believe the light can now be toured for a small fee which goes towards the upkeep of the light. Another similar project is the Frying Pan Tower light which is located 20 some miles off the coast. The light was purchased from a government surplus auction and is now being converted into a bed and breakfast for adventurous customers.


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